India’s growth will be less than expected as the global financial crisisand a string of interest rate hikes slows Asia’s third-biggest economy, the country’s finance minister said on Wednesday.
“Dark clouds have gathered in the global scenario, casting a shadow on us,” Pranab Mukherjee said in New Delhi, giving his annual assessment of India’s economic health to media.
He added that it will be a “cause for celebration” if the country grows by around eight percent, already lower than an earlier projection of nine percent in the government’s February budget.
“We must not lose perspective of the global situation. There is a slowdown all over the world,” he said, noting that the US economy grew by just 1.6 percent in the second quarter.
Mukherjee declined to give a precise growth forecast, but Prime Minister Manmohan Singh recently predicted India’s economy would expand by “close to eight percent” in the financial year to March 2012.
Most private economists expect India’s growth this year to be in the low seven percent range, robust by anemic Western standards, but too slow to fulfil pledges of significant poverty reduction and job creation.
For 2012, economists are even gloomier, with Indian securities house Ambit projecting growth of 6.2 percent.
Mukherjee added India hoped to meet its target of reducing the fiscal deficit to 4.6 percent of gross domestic product this year but “it will be a great challenge.”
Last year, the deficit fell to 4.7 percent, beating a government target of 5.1 percent, helped by $15 billion in revenues from the auction of third-generation (3G) mobile licences.
“That (the auction revenues) is not going to repeat itself this year,” Mukherjee said.
India’s growth has weakened under the brunt of 12 interest rate increases since March 2010 which have pushed up borrowing costs for everything from consumer appliances to plant equipment.